Is your money working hard enough?

Most of us work very hard for our money. In the past we could leave any excess cash in a bank account and the bank would pay us interest for keeping our money with them. We didn’t have to take any investment risk yet we would still generate an attractive return.

How times have changed. Deposit rates are at all-time lows, Credit Unions have imposed caps on savings and An Post have reduced the return on Saving Certs, all of which means that if you want to get your money working for you, you need to consider alternatives. Unfortunately, the alternatives involve some element of risk. A lot of people get nervous when they hear the word “risk” as its often associated with “losing all my money”. While investment funds can fall in value, there are plenty of low-risk options for a nervous investor.

As a Financial Adviser I am being asked the same question now more than ever; where is the best place to invest money? Before anyone considers investing it is really important to establish an emergency fund.

It's my view that any money you think you are going to need within the next three years should be accessible – any money you have ear marked for longer than that should be generating a return for you. So what do you do with the money that isn’t going to be needed in the short term?

Below are a couple of low-risk options that we have been talking to our customers about..

Easy Access Investment Account (monthly investment or single premium)

Through an investment account you can invest in a range of different multi-asset funds, which are very popular with Irish investors. These funds invest in some of the biggest companies in the world and allow you to invest in a diversified mix of assets (for example equities, bonds and property) which helps to spread the riskiness of your investment. Generally, people are rewarded for taking some risk with their investment and assets such as equities and bonds have the potential to earn you higher returns than cash. You can start an investment account by investing a regular premium, a single premium or a combination of both.

Regular Premium Investment

Building up wealth is all about good habits, and committing to a regular amount each month is highly recommended. You don’t have to have lots of money to get started, you can start from as little as €100 per month. Investing on a monthly basis also means you can benefit for “Euro Cost Averaging”. Euro-Cost Averaging is simply the term used to describe the strategy of making regular incremental investments over a period of time as opposed to a one-off lump sum investment.

It’s a method used to reduce your exposure to big ups and downs of investment markets. Picking a monthly investment amount you are comfortable with is key to the success of the strategy.

While the amount of money you put in at each interval will be the same, the number of units that money buys you will not. That's because market fluctuations dictate share prices, causing them to rise and fall. With this approach, you end up buying more units when prices are low and fewer units when prices are high. By following this simple strategy, you can protect yourself against market fluctuations and downside risk in the market. By buying a fixed euro amount on a regular basis, your focus is on accumulating assets on a regular basis, instead of trying to time the market.

Lump sum investments

Investors often sit on the side-lines, waiting for the “perfect time” to invest. History has proven that this is often a mistake. Zurich have an investment strategy called Auto-Invest which tries to reduce “timing risk”. Auto Invest allows you to place a lump sum today and Zurich drip-feed it into your chosen fund or funds over a 6 month or 12 month period, again reducing the risk of investing.

The above are just a couple of options that low risk investors are considering for their savings.

We know that taking the first step into investment markets can be daunting and that’s why I would recommend that you seek professional financial advice from a Financial Broker or Advisor.

It’s our job to help guide you into making the correct decision about where to invest your money.

Whether you’re a new investor, looking to invest a large lump sum, or seeking income from your investments we’d love to help.

David Keenan, QFA Planalife (Brendan J Kelly), Bastion St, Athlone

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